Advanced Micro Devices - Moderated (AMD) Message Board

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Technology Stocks : Advanced Micro Devices - Moderated (AMD)

AMD 256.12

+0.5%

Oct 31 9:30 AM EST

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To: kash johal who wrote (255523)	8/13/2008 1:21:26 AM
From: wbmw	Read Replies (2) of 275872

Re: i think the price has bottomed and like what i hear on ati. The price bottoms when AMD has a clear path towards profitability. If you look at AMD's last quarter's earnings, they had an operational loss of $143M, and that included a one time benefit of $193M from the sale of fab equipment. This means that AMD's gross margins, which were stated to be 52%, would have been only 37% without the one time benefit. This is largely driven by declining prices from their CPU division, which isn't likely to improve in the short term. ATI only contributed $248M to AMD's revenues, which is 18% of the company's total revenues. The graphics division has also been operating at a loss since AMD bought them 6 quarters ago. Even if you figure that this division becomes profitable, there's no way that it could be profitable enough to reverse the much greater operational losses. But suppose this can be overcome by downsizing the company. AMD would have to reduce costs by $336M from Q2 in order to post an operational profit with their current gross margin percentage. That would require downsizing of the company by nearly 35%. But that would only get them part of the way towards profitability. After operational profits, AMD also has to overcome the interest payments from their huge debts - which takes close to $100M in payments every quarter. Furthermore, AMD has already written off most of the value of the ATI purchase, which means not even AMD expects this division to ever pay back the billions of dollars that AMD paid for them. If after keeping all this in mind, you still think you see an entry point that everyone else is missing, then feel free to take the risk. Just be sure you get informed about the fundamentals before you make any uninformed choices.

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